What Is an Annuity Statement?

by Fred Decker

If you don't understand your annuity statement, ask the broker to explain it for you.

If you have small children of your own or spend time with friends who do, you'll know that the saying "no news is good news" doesn't apply to them. A suspicious silence from the kids usually means something's going on that you wouldn't approve of. Investments are another area where silence is unwelcome. With annuities, for example, you'll receive periodic statements detailing all activities and growth in your plan.

Frequency

The type of annuity you own determines how often you'll receive a statement. Fixed annuities return a predetermined interest rate. Since that's the only meaningful activity on your account, they'll typically generate only one statement. However, variable and index annuities are more complex. They generate returns by investing in mutual funds or other equities, which go up and down during the year. They also actively buy and sell portions of the portfolio. This higher activity level means a greater need for reporting, so they typically send a statement at the close of each quarter.

The Basic Information

There is no standard format for statements, with each company following its own preferred layout. Some are easier to read than others, with carefully planned use of space and simple language. However, each includes the same basic information. This includes the annuity owner's name and address, account number with the company, and a several ways to contact the company's customer service department if you have questions. There will also be a simple summary of the annuity's value at the starting date and ending dates of the reporting period, to provide a quick snapshot of the plan's gains or losses during the year.

Financial Information

With a fixed annuity, there are few financial details. Your statement simply reports the interest rate your investments earned during the previous year, and the rate that will be applied during the coming year. Statements for variable annuities are much more complex, because each annuity can contain a wide range of investments. The summary section of the statement will list each investment in your annuity, so you can see at a glance what you hold in your portfolio. It will also provide you with the returns on each investment during the reporting period.

Transaction Details

Statements for variable annuities typically contain a more detailed listing of your investments' transactions throughout the reporting period. This includes any purchases or sales of mutual fund units by your annuity, but it goes deeper than that. For example, mutual funds held in your annuity might receive dividends during the quarter, or might take a capital gain on a stock that's risen precipitously. If you should withdraw funds from the annuity your original contributions are not taxable, but these gains are. Your statement allows you to track how much of your current balance comes from those gains, so you can estimate the tax impact of any withdrawals.

References

About the Author

Fred Decker is a trained chef and certified food-safety trainer. Decker wrote for the Saint John, New Brunswick Telegraph-Journal, and has been published in Canada's Hospitality and Foodservice magazine. He's held positions selling computers, insurance and mutual funds, and was educated at Memorial University of Newfoundland and the Northern Alberta Institute of Technology.